Cenvat credit reversal on stock after SSI threshold was upheld where finished goods used mixed-period inputs and Rule 11 applied.

Cenvat credit on finished goods held in stock after an assessee crossed the SSI exemption threshold was required to be reversed under Rule 11(3) of the Cenvat Credit Rules, 2004. The stock on 31.03.2013 was found to have been manufactured from inputs procured over different periods, so it could not be treated as wholly covered by inputs bought during the duty-paid period. Credit attributable to inputs in stock as on 17.12.2012 had already been reversed under Rule 11(2), while credit embedded in later inputs used in the remaining stock was recoverable under Rule 11(3). The demand and interest were upheld.

---

---

Issues: Whether Cenvat credit was required to be reversed under Rule 11(3) of the Cenvat Credit Rules, 2004 in respect of finished goods lying in stock on the date the assessee crossed the SSI exemption threshold and resumed exempted clearances.

Analysis: The goods were manufactured from inputs procured over different periods, and the record showed that the quantity of finished goods lying in stock on 31.03.2013 could not have been wholly manufactured from inputs purchased only during the duty-paid period. The credit attributable to inputs lying in stock as on 17.12.2012 had already been reversed under Rule 11(2), while the credit embedded in inputs procured thereafter and used in goods remaining in stock on 31.03.2013 was recoverable under Rule 11(3). On that basis, the demand and interest were found to be legally sustainable.

Conclusion: The demand for reversal of Cenvat credit was upheld and the appeal failed.

---